Obamacare doesn’t ‘bend the curve,’ it just breaks the law

December 14, 2010

Instead of “bending the curve,” Obamacare broke the law. Not only is the new healthcare law fiscally unsustainable, it’s unconstitutional — at least according to a U.S. judge in Virginia.

In the end, of course, it will likely be the Supreme Court that determines the constitutionality of a key piece of President Barack Obama’s healthcare reform. If the majority should rule that Americans can’t be forced to buy insurance or face a fine — as the law would require — the entire plan could implode.  But whichever way the high court rules, the massive overhaul will itself need an overhaul, if not a complete scrapping, if America is going to get healthcare spending under control and prevent it from bankrupting the U.S. government.

While the White House is certainly displeased with the Virginia court’s ruling, the result could have been far worse. U.S. District Judge Henry Hudson said that while the mandate itself was unconstitutional, the finding didn’t infect the rest of the law, which could continue to be implemented. Trouble is if the Supreme Court eventually finds the individual mandate portion unconstitutional, Obamacare could still easily unravel.

Much of the reform is built around a simple tradeoff. Insurers are required to accept everyone who applies. In return, everyone has to buy a policy. While this means insurers have to accept folks with expensive pre-existing illnesses, they are theoretically compensated with more customers, both sick and healthy. But without the individual mandate, an adverse selection problem emerges — only sick people currently lacking coverage would have an incentive to seek insurance.

Jonathan Gruber, a healthcare economist at Massachusetts Institution of Technology and government adviser, calculates that such a scenario would reduce the law’s gain in insurance coverage by more than two-thirds — 80 percent of people without insurance would remain that way — and force companies to raise premiums on individuals by 40 percent. As he puts it: “Without the individual mandate, the entire structure of reform would fail.”

In short, the U.S. healthcare system would get even pricier while still leaving vast numbers of Americans without insurance. A more expensive system would mean government healthcare spending would rise even faster.

Even if the White House overturns the Virginia ruling, the system would still require major reform. A detailed review of the law’s fiscal impact by Obama’s own chief healthcare actuary predicts it will save less than originally envisioned. The increase in long-term Medicare hospitalization outlays, for instance, is still scheduled to double to 4 percent of GDP from under 1.7 percent currently. A preliminary forecast estimated the increase at as little as 30 percent.

So even if the law should meet the standard of constitutionality, it fails another standard — of sustainability. And there’s no court of appeal for that.

4 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

If this makes sense for health care, mandating that everyone buy it to reduce the cost for all, why not apply this model to other forms of insurance?

How about automobile insurance? Make everyone buy automobile insurance, even if they do not drive or own a car, so the cost of automobile insurance is lower for everyone?

How about medical malpractice insurance? They could make this affordable by mandating that everyone buy medical malpractice insurance, even if they are not a doctor, so that it becomes cheaper.

Posted by HeatherGirl | Report as abusive

[...] This post was mentioned on Twitter by Candice Nicholson, Victoria Evans. Victoria Evans said: Obamacare doesn't 'bend the curve,' it just breaks the law http://bit.ly/iao3kw [...]

[...] Obamacare doesn't 'bend the curve,' it just breaks the lawReuters Blogs (blog)VA Judge Rules Against Health Care BillCNN (blog)The Free Lance-Star (blog)all 12 news articles » [...]

HeatherGirl: I like your reasoning, and the list of insurance products to which it could be extended is unlimited. Make everybody pay for everything, whether they need it or not!

Posted by Gotthardbahn | Report as abusive

[...] first testWashington Post (blog)Rough Day for ObamacareThe Free Lance-Star (blog)Daily Caller -Reuters Blogs (blog) -Charleston Post Courierall 30 news [...]

All we really need to reform healthcare is mandatory catastrophic coverage similar to auto liability for the 30 million uninsured, increased competition nationwide and tort reform/limit lawsuits! Imagine what 30 million more will do to our shortage of doctors?? Boomers: when you were in your 20s, did you self insure if you weren’t working for a company that provided coverage?? How’d it work out? Please, our government has long track record of inefficiency-gov healthcare may be the last straw that breaks us!

Posted by DrJJJJ | Report as abusive

1. Auto insurance mandate !

Under historical interpretations of the Constitution, Congress can dictate the economic activity of citizens so long as that activity will have profound, large-scale effects on the national economy.
 
2. Health insurance protects you PLUS all !
 
** Inaction cost, $9trillion over the next decade, ((Some of CBO analysis : While the costs of the financial bailouts and economic stimulus bills are staggering, they are only a fraction of the coming costs from Social Security, Medicare, and Medicaid. Over the next decade, the Congressional Budget Office (CBO) projects that each year Medicaid will expand by 7 percent, Medicare by 6 percent, and Social Security by 5 percent. These programs face a 75-year shortfall of $43 trillion–60 times greater than the gross cost of the $700 billion TARP financial bailout)).

Among the thirty-three industrialized countries in the world, only America has no universal health care. Why do all the leading countries require participation in a universal plan? Because every other country understands that health care is not only a basic right, it is also a necessity, a sane policy protecting the country from plagues and epidemics but also from bankruptcy by providing modern and uniform health care for its people.

Posted by hsr0601 | Report as abusive